02/24/2015
India / Economics
Inflation is easing, growth is improving, and long-needed reforms are moving ahead. India is lifting itself out of a cyclical and structural trough.
India will be in a sweet spot in the fiscal year 2015/16 as inflation eases and growth improves – with revised GDP figures adding to the sizzle. The holy trinity of a strong-willed government, a credible central bank and macro stability, has lifted the economy from a cyclical and structural trough.
Such optimism is reflected in the 42% jump in the benchmark equity index from January 2014 and upheld by strong foreign inflows into the debt and equity space.
Meanwhile, the reform agenda is moving ahead with an emphasis on improving the ease of doing business, making the tax regime more predictable and ironing out bottlenecks in the factors of production – capital, labour, enterprise and land.
The Bharatiya Janata Party (BJP) government of Prime Minister Narendra Modi won a rare single-party majority at last year’s elections and we see that as an important political opportunity to initiate key reforms. Insufficient representation in the upper house of parliament, however, has become a hurdle of late. Even so, this is unlikely to scupper reform efforts. These are likely to be pursued through ordinances and joint parliamentary sessions, while the BJP gradually seeks to extend its reach through state assembly elections.
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